On November 29, 2022, the Superior Court of New Jersey, Appellate Division issued an opinion in Zuluga v. Altice USA stating a former employee must arbitrate her sexual harassment claims that arose in October 2021.  In doing so, the appellate panel recognized that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) does not apply retroactively to claims that accrued prior to its passage on March 3, 2022.

Facts
In this case, the plaintiff brought suit against her former employer and two individual defendants alleging violations of the New Jersey Law Against Discrimination (“NJLAD”).  She claimed that her former employer fostered and condoned a sexually hostile work environment and constructively discharged her, and claims that the individual defendants aided and abetted the creation of a sexually hostile work environment.  

In connection with her employment, in October 2020 the plaintiff entered into a Mutual Arbitration Agreement, which states that it is “governed by the [Federal Arbitration Act, 9 U.S.C. §§ 1-402 (FAA)] and, to the extent not inconsistent with or preempted by the FAA, by the laws of the state in which Employee last worked for the Company without regard to principles of conflict of laws.”  The Agreement also provides that all disputes, claims, complaints, or controversies would be subject to arbitration at the election of any party and would be resolved by arbitration and not by a court or jury.  Additionally, the Agreement states that by checking the signature box, the employee acknowledges that they are giving up the right to have any disputes that are subject to arbitration be decided by a court or jury.  In this instance, the plaintiff checked the signature box.

Analysis
The plaintiff filed suit in October 2021, and the defendants moved to dismiss the complaint and to compel arbitration.  On March 4, 2022, the judge rendered an oral decision granting the motion, dismissing the plaintiff’s complaint with prejudice, and ordering the parties to arbitration.  The judge, however, did not address whether Section 12.7 of the NJLAD would continue to be preempted by the FAA, as amended by the EFAA, which was signed into law by President Biden the day before the motion was decided.  The plaintiff appealed.

In its decision, the appellate panel recognized the it only needed to determine the validity of the Agreement, as the plaintiff did not dispute that her claims fell within the scope of the Agreement. The plaintiff first argued that the agreement was invalid because it failed to clearly and unambiguously provide notice that she was waiving her constitutional and statutory rights.  The court, however, found that this was “betrayed by the language of the [agreement] itself[,]” as it clearly and unambiguously explained that the plaintiff was giving up her right to bring her claims in court or have a jury resolve those claims and clearly delineated between arbitration and the right being relinquished.

The plaintiff also claimed that the agreement is against public policy and unenforceable under Section 12.7 of the NJLAD, which states, “A provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable.”  The appellate panel noted, however, that previous decisions made clear that the FAA pre-empts Section 12.7 when applied to prevent arbitration called for in an agreement governed by the FAA.

Notably, the court also rejected the plaintiff’s argument that the EFAA, which amended the FAA, applied retroactively and would allow her to proceed with her sexually hostile work environment and constructive discharge claims pursuant to Section 12.7 of the NJLAD.  The court recognized that the notes accompanying the EFAA and the language of the EFAA itself state the provisions shall not apply retroactively.  As a result, the court concluded that the EFAA would not apply to plaintiff’s claims, which arose before it was signed into law on March 3, 2022, and her claims must be arbitrated. The court discarded the plaintiff’s contention that preemption of Section 12.7 should not apply where the arbitration did not yet take place, and held that the plaintiff is bound by the FAA’s continuing preemptive effect as to claims that accrued before March 3, 2022.

However, the court did note that the plaintiff’s case should not have been dismissed.  Instead, under the FAA, the case should have been stayed pending arbitration.  As a result, the court reversed the dismissal and remanded to the trial court to enter an order staying the case until arbitration is completed.

Takeaways
This decision clearly states that a plaintiff subject to a valid arbitration agreement under the FAA will not be able to avoid arbitration under the EFAA for sexual harassment and assault claims arising before March 3, 2022.  As such, New Jersey employers should be aware that those claims can still be arbitrated – something that will remain relevant in the near future, as the statute of limitations for NJLAD claims is two years.